New Zealand Inflation Surprises

1 February, 2019

Summary

  • Consumer prices rise by 0.1% during the three months ending December 2018
  • New Zealand’s annual inflation rate at 1.9%
  • Fuel prices drag consumer prices lower
  • Inflation pressure is stronger than expected
  • RBNZ’s rate cut prospects diminish

New Zealand’s fourth-quarter inflation report for 2018 showed that the era of low inflation should end. The annual inflation rate scores near the 2.0% inflation mid-point target set by the RBNZ.

Consumer prices posted a modest increase as fuel prices dragged lower, but inflationary pressures on the domestic front turned out stronger than expected by the RBNZ’s recent forecasts.

Although the latest inflation data are negligible, the prospects of inflation inching higher were positive news. New Zealand’s consumer prices are yet to test the upper end of the inflation target band of 3.0% before the prospects of a rate hike are back on the table.

For the moment, the increase in inflation is likely to see the markets scaling back their speculation of a rate cut from the RBNZ.

Consumer prices see a slight increase


Consumer prices in New Zealand rose by  0.1% which was slightly above the median estimates of a no change that was forecasted. However, headline inflation increased at a weaker pace following a 0.9% increase seen during the third quarter of last year.

The increase in inflation came as it reflected the seasonal factors as well. Vegetable prices fell 21% from their peak in the previous quarter. This decline outweighed other sectors such as airfares, car rentals, and accommodation. On a seasonally adjusted basis, New Zealand’s inflation rose 0.4% during the three months ending December. This represents almost the same pace of increase compared to the previous quarter.

The latest inflation data was also somewhat below the RBNZ’s forecasts. In the November monetary policy statement, the RBNZ forecast that inflation would rise 0.2% in the December quarter. Fuel prices fell sharply during the reported period. The declines in fuel prices, however, came about after the RBNZ’s forecasts. The 0.4% decline in tradable inflation is soft in comparison to the RBNZ’s estimates of a 0.1% decline.

Although fuel prices decreased, the average during the December quarter was only limited. Fuel prices are down 8.0% since the start of the year in December on an average basis. This should reflect on the upcoming inflation reports.

Headline inflation should remain soft over the next few quarters at the very least. However, the declines are only temporary factors.

There was a modest pick up in the tradables inflation during the latest quarter. This came about due to the substantially weaker exchange rate of the New Zealand dollar throughout last year. A lower exchange rate should have a lagging impact on imported goods.

Services are also beating estimates


Prices of non-tradable goods and services however outperformed the forecasts and have been doing so since the past couple of quarters. During the December period, non-tradables rose by 0.7% and rose to an annual rate of 2.7%. This was the highest increase since June 2014.

This trend is expected to continue in the coming years as a tightening labor market, and government pay increases are expected to accelerate pushing wage costs higher. Firms reported higher cost pressures which are also likely to be passed on to consumers.

There is also a chance that inflation in the coming quarters could be higher. Statistics New Zealand reported that it would be using a methodology to calculate inflation. This new method will also include a new way to calculate rental prices. This should see a faster pace of growth in the overall measure of inflation.

Elsewhere, the price of newly built homes slowed from their highs in the previous months. This was in line as seen by the slowdown in the home sale prices due to the government efforts to clamp down on speculative buying in the real estate sector.


Source link  
Retail Sales See Biggest Drop

Yesterday was not great for the Fed as the latest US data added to fears of a growth slowdown. December Retail Sales fell 1.2% over the month, wildly...

Non-manufacturing activity slips down

The services sector in the United States expanded at a slower pace in January. The Institute of Supply Management's non-manufacturing PMI...

Slowdown Worries Plague Eurozone

The Eurozone's economy got off to a sluggish start in 2019. Latest forward-looking indicators showed as some of the Eurozone's major economies...


UK Trade Deficit Widens On Brexit

Alongside the weaker than anticipated GDP print released yesterday, GBP was weighed down by data which showed a widening of the UK trade...

New Zealand Unemployment Rate

The latest unemployment report from New Zealand showed a disappointing performance from the labor market for the period. Data released...

Further Round Of US/China Trade Talks

Traders will be hoping for some positive headlines this week around the ongoing US/China trade talks, following the disappointing announcement...


RBNZ to keep rates on hold

The week ahead will see the RBNZ holding its monetary policy meeting. Interest rates in New Zealand should remain unchanged at this week's meeting...

Fourth Quarter NZ Employment

We could have some volatility in NZD pairs coming up on Wednesday at 20:45 CET (or 14:45 CET) with the release of a series of unemployment...

U.S. hiring continues at a steady pace

The latest monthly jobs report from the United States showed that the economy posted a steady pace of job growth during January. The data comes...


In the past 24 hours Bitcoin has gained 1.04% and reached $3676.85823326. Open your trading account with the best cryptocurrency brokers on special terms today.

In the past 7 days the EUR/USD pair has lost -0.5573% and is now at $1.1277. Start trading and making money on Forex today.

In the past 7 days Ethereum has gained 9.38% and is now at $129.086992432. Have the most popular cryptocurrencies compared online 24/7.


Top Brokers offering Forex Market Analysis



Forex Currencies Forecasts



Top 10 Forex Brokers 2019

# Broker Review
1easyMarketseasyMarkets92%
2FXTMFXTM88%
3HYCMHYCM87%
4FxProFxPro85%
5FIBO GroupFIBO Group84%
6OctaFXOctaFX83%
7HotForexHotForex82%
8FXCMFXCM79%
9XMXM73%
10FP MarketsFP Markets70%
  


Share: